SUPPLEMENT DATED SEPTEMBER 9, 1998
TO
WEBS INDEX FUND, INC.
PROSPECTUS
DATED OCTOBER 29, 1997
NOTE: This Supplement relates solely to the Malaysia (Free) WEBS Index
Series and is not relevant to any other WEBS Index Series.
This Supplement relates to the Prospectus of WEBS Index Fund, Inc.
(the "Fund") dated October 29, 1997 and is in addition to the Supplement
dated April 22, 1998.
Impact of Malaysian Controls on the Malaysia (Free) WEBS Index Series
On September 1, 1998, the government of Malaysia imposed capital
restrictions that impact the operations of non-Malaysian investors such
as the Malaysia (Free) WEBS Index Series (the "Malaysia Series") in
certain respects. Important details regarding the capital controls and
their administration are not yet available. However, based upon current
information, the Fund believes that it is unable to exchange Creation
Units of WEBS principally on an in-kind basis as contemplated in the
Prospectus. In such circumstances, the Fund is temporarily suspending
new creations of Creation Units of WEBS of its Malaysia Series.
In light of the Malaysian capital restrictions, the Fund is
concerned about its ability to honor redemptions of Creation Units of
WEBS of the Malaysia Series. To the extent the Fund is presented with
requests for the redemption of Creation Units of Malaysia Series WEBS,
the Fund will seek to honor such requests consistent with the Malaysian
capital restrictions. Based on the information available to date, the
Fund believes that while it can no longer make in-kind redemptions in
Malaysia Series WEBS, it may be able to honor redemption requests
through the delivery of Malaysian ringgits in Malaysia, subject to
receipt of Central Bank approval. The Fund understands that a non-
Malaysian investor cannot freely exchange holdings of Malaysian ringgits
for other currencies at this time or freely transfer ringgits outside
Malaysia. In addition, details regarding the Malaysian Central Bank
approval process are not available at this time. In the circumstances,
the Fund suggests that requests for the redemption of Creation Units of
Malaysia Series WEBS should not be made and urges investors
contemplating such redemptions to consult with Malaysian counsel.
As a result of the suspension of creations of Malaysia Series WEBS
and the Fund's belief that it cannot make in kind redemptions in
Malaysia Series WEBS, the Fund believes that WEBS of the Malaysia Series
are likely to trade at larger discounts or premiums to their net asset
value than in the past and that such discounts or premiums may be
material. Although WEBS of the Malaysia Series are expected to continue
trading on the American Stock Exchange, there can be no assurance that
an active trading market will be maintained for Malaysia Series WEBS.
Because of the Malaysian capital restrictions, the Malaysia Series
is subject to severe restrictions on exchanging Malaysian ringgits for
U.S. dollars for at least the next year, and accordingly may seek to
borrow dollars to pay its U.S. dollar expenses and to make required
distributions to shareholders. There can be no assurances that the
Malaysia Series will be able to make such borrowings. The interest
expense associated with any borrowings would reduce the income of the
Malaysia Series and introduce leverage into its capital structure.
Leverage would magnify the impact on net asset value of decreases and
increases in the value of the Malaysia Series' investment portfolio.
In computing the net asset value of the Malaysia Series, values
denominated in Malaysian ringgits may be converted into U.S. dollars at
an exchange rate other than the "official" exchange rate of fixed by
Malaysian regulatory authorities from time to time if, in the Fund's
judgment, another exchange rate represents a better measure of the
ringgit's value. As a result of this policy, the exchange rate used by
the Fund in converting ringgits to U.S. dollars may differ from both the
"official" exchange rate and the rate used in computing the Morgan
Stanley Capital International ("MSCI") Malaysia (Free) Index, which
serves as the benchmark index of the Malaysia Series.
